Category: ethics

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Private, pocket listings surge during housing recovery

luxury real estateThe recovering housing market has brought to light the controversial practice of the pocket listing. Although pocket listings are more common in the upper bracket and luxury real estate market, pocket listings tend to increase during hot markets when there are few available listings and increased home buyer competition.

by Dan Krell © 2013

Sometimes called “off-market” listings, or “private” listings, the pocket listing is a home sale that is not openly marketed in the multiple list service. The listing is kept “quiet” and is only known to the listing agent and/or broker who typically market the home to a select network of contacts and clients.

Pocket listings are common among the utra-wealthy because of privacy concerns; anonymity is an often cited reason for a home seller to choose to have a pocket listing, typically because the seller has some celebrity status. Private listings may also be promoted as a way to limit home viewings to those who are financially qualified to purchase the home; the focused buyer pool reduces the number of showings, which may be less disruptive to the seller’s daily schedule.

However, critics of pocket listings often point to MLS concerns, dual agency issues, and housing laws as reasons to be wary of the practice. Agents are not the only ones who have access to an MLS listing; MLS listings are often syndicated throughout the internet and available for anyone with internet access to see. Clearly, one of the obvious issues of a pocket listing is the reduction of marketing exposure that is lost from not having an MLS entry. Another issue that arises from a pocket listing is that it skews home sale and price data that appraisers use for valuations.

Consumer Advocates in American Real Estate (caare.org) cites the possibility of dual agency (where the buyer and seller’s agent is from the same real estate company) as a major concern for pocket listings. Because dual agents do not act exclusively in the interests of either the seller or buyer, the possibility of a conflict of interest may arise. Additionally, CAARE states that a seller who agrees to a pocket listing may exclude 70% or more of qualified buyers who are actively searching for homes.

A recent Maryland Real Estate Commission newsletter (The Commission Check; Summer/Fall 2013), reprinted an article from the August 2013 ARELLO® Boundaries discussing pocket listings, that stated; “pocket listings may run afoul of federal fair housing laws that not only prohibit readily apparent or intentional housing discrimination against protected classes, but also practices that have a “discriminatory effect” that “… actually or predictably results in a disparate impact on a group of persons or creates, increases, reinforces, or perpetuates segregated housing patterns because of race, color, religion, sex, handicap, familial status, or national origin…”

Unbeknownst to some home sellers, their home sale may be marketed as a pocket listing during the period between the signing of listing paperwork and when the home is entered into the MLS. Although this time is often used to prepare a home for sale; it may also be privately marketed by the listing.

Although the National Association of Realtors® has “not defined what constitutes a pocket listing, nor do they have an official policy regarding the practice” (“What is a Pocket Listing”; Realtor Magazine, May 2013); potential housing law issues and ethical concerns of pocket listings should be addressed with your real estate agent/broker.

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Disclaimer.  This article is not intended to provide nor should it be relied upon for legal and financial advice. Readers should not rely solely on the information contained herein, as it does not purport to be comprehensive or render specific advice.  Readers should consult with an attorney regarding local real estate laws and customs as they vary by state and jurisdiction.  This article was originally published the week of October 28, 2013 (Montgomery County Sentinel). Using this article without permission is a violation of copyright laws. Copyright © 2013 Dan Krell.

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Dual agency debate continues; revealing results from recent real estate research

by Dan Krell © 2013
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home salesUnderstanding representation in a real estate transaction can sometimes be tricky. You might think, after all, “If I work with a real estate agent, they represent me.” Not so fast; understanding whom real estate agents represent can be confusing in some situations, most notable is the concept of dual agency.

Maryland, like many other jurisdictions around the country, allows for dual agency. “The possibility of dual agency,” as described on the Maryland Real Estate Commission website (www.dllr.state.md.us/license/mrec/mrecrep.shtml), “…arises when the buyer’s agent and the seller’s agent both work for the same real estate company, and the buyer is interested in property listed by that company. The real estate broker or the broker’s designee, is called the “dual agent.” Dual agents do not act exclusively in the interests of either the seller or buyer, and therefore cannot give undivided loyalty to either party. There may be a conflict of interest because the interests of the seller and buyer may be different or adverse” [emphasis added].

Dual agency has been widely debated since its inception. And as the industry rapidly transforms, the issue is likely to continue to be a hot topic; for example, as real estate teams have become more prevalent in the marketplace, many argue that the potential for conflicts of interest in dual agency transactions becomes increasingly significant.

In his February 2010 Agbeat.com article (February 16, 2010; The Age Old Dual Agency in Real Estate Debate), Patrick Flynn states that although dual agency is legal in many jurisdictions, “…dual Agency is the ultimate no win scenario. Even if all parties agree in writing (and if you explained the likely pitfalls and risks to both parties…they never would agree) you simply cannot perform your prescribed duties…”

He continues to say that although there is potential for damage and irreparable harm to those involved in a dual agency transaction, most of these transactions close “without a hitch;” and the agent’s attention moves from common sense and integrity to the “little devil” on their shoulder that tells them, “Look at all the money you made!”

Recent research, investigating whether dual agency transactions are a result of agent incentives (e.g., money) or efficiency, suggests that the issue deserves further investigation to understand (among other things) the effects of dual agency, potential for conflicts, and to determine if buyers and sellers are poorly informed. Regardless, Brastow & Waller conclude in their 2013 study (Dual agency representation: Incentive conflicts or efficiencies? The Journal of Real Estate Research, 35(2), 199-222) that dual agency is more likely to occur at the beginning and end of a listing contract. When a dual agency sale occurs at the beginning of a listing, they conclude that it is a result of agent incentive and results in an efficient quick sale. However, when a dual agency sale occurs at the end of a listing contract it is usually due to agent incentive (e.g., avoiding loss of sale) and the home is more likely to sell for less.

Locally, the Maryland Real Estate Commission requires that real estate licensees, who are assisting you, provide disclosures describing agency relationships (including dual agency) “at the time of the first scheduled face to face contact with you.” Your agent can assist you in understanding dual agency, when it occurs, the potential issues of dual agency, as well as what should happen if you decide to not agree to dual agency.

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Disclaimer.  This article is not intended to provide nor should it be relied upon for legal and financial advice. Readers should not rely solely on the information contained herein, as it does not purport to be comprehensive or render specific advice.  Readers should consult with an attorney regarding local real estate laws and customs as they vary by state and jurisdiction.  This article was originally published the week of September 9, 2013 (Montgomery County Sentinel). Using this article without permission is a violation of copyright laws. Copyright © 2013 Dan Krell.

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Rude home buyers take note

rude home buyersHas increasing incidents of rudeness become tolerated, or is there an epidemic of narcissism? Rude home buyers are growing in numbers. Regardless, home buyers and their agents should be respectful of the home seller and their property.  After all, they are “guests” while viewing the home.

Rude home buyers take note

Although the majority of home buyers and real estate agents adhere to the “golden rule” and are polite and courteous, it’s not uncommon for a few to be bad-mannered and disrespectful. Of course, it’s alright for you to be honest about your feelings towards a home; and home sellers appreciate honest feedback. However, if the home is not to your taste or is not in the condition you expect; there is no need to lay on the insults as you peruse the home – rather, be honest to yourself and your agent, do the polite thing and excuse yourself. Don’t waste your time and energy walking through a home that is not for you.

Contrary to belief, “insulting” is not a negotiation tactic; there is a difference between being outright aggressive and assertive. Insulting the seller and their home can be counterproductive; there is a difference between being offensive about living conditions versus stating objective and factual information about the home’s condition. Rather than offering a lower price for a home based on your opinion of the home owner, a lower price makes more sense if you can make a case that the home needs updating and/or repairs.

Although most home buyers view homes with their real estate agent, many ride home buyers attend open houses alone. If you view homes with your agent, they may remind you of etiquette and behavioral expectations. However, if your agent acts disrespectful toward the seller and/or their property, it is not an excuse for you to follow suit.

Home sellers deserve respect

Being respectful of home sellers and their properties is not only expected, it is a good strategy. If you’re unsure about a situation, ask your agent how to act/respond. However, here are some general etiquette tips while viewing homes (alone or with your agent): Be respectful of the occupants by adhering to showing instructions; don’t show up unexpected and demand to see the home; if you cannot keep an appointment, make sure the occupant is notified; be respectful of the property; follow showing instructions in the home seller’s absence, such as requests to remove shoes; in the case of potentially dangerous situations, such as a gas odor, a tripped security alarm, unexpected power failure, etc – alert your agent and/or the proper authorities immediately; if you bring children with you – always keep an eye on your children; never eat in the home, as it could leave a mess in the home; leave the home as you entered it by locking all exterior doors and shutting off the lights as necessary; criticism is best left for a later time – your comment s may be overheard by others; if the home is not to your liking – politely excuse yourself from the home.

Rude home buyers often sabotage their transaction

Remember that even though you are rightly focused on your housing needs, you are a guest while viewing others’ homes. And although there is no expectation for you to offer positive feedback – there is an expectation for you to be respectful of the owners and occupants of the home. At some point the roles may be reversed and you will be the home seller expecting others to respect you and your home.

Original published at https://dankrell.com/blog/2013/01/31/rude-and-narcissistic-home-buyers-take-note-home-sellers-need-respect-too/

by Dan Krell
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This article is not intended to provide nor should it be relied upon for legal and financial advice. Using this article without permission is a violation of copyright laws. Copyright © 2013 Dan Krell.

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Do people really care about real estate agent ethics?

What factors do you consider when shopping for items or services? Is it price? Brand recognition? References? When it comes to hiring a real estate agent, if you’re like most people, chances are your choice is not necessarily based on the agent’s adherence to ethical standards.

Of course, high integrity and ethical behavior is admirable. However, what may seem counter intuitive to an ethical society, a body of research indicates that consumer choices are not typically based on ethical criteria. Of the many research articles published in peer reviewed journals, here is a very select few that point to such a conclusion.

First, a 2005 study seeking to determine if consumers buying decisions were based on companies’ ethics was conducted by De Pelsmacker, Driesen, & Rayp. They indicated that although there are numerous attitude surveys that reveal consumers actually value ethics in the marketplace, consumer behavior is not consistent. The study examined consumer’s willingness to pay for fair trade coffee (considered to be the “ethical” choice), and found that although 50% of the study sample were considered fair trade “lovers” or “likers,” only 10% of the study sample were willing to pay the premium for the ethical choice (Do consumers care about ethics? willingness to pay for fair-trade coffee. The Journal of Consumer Affairs, 39(2), 363-363-385.).

Not convinced? A 2001 study investigated whether consumers actually care about ethical behavior as well as whether good/ bad ethical behavior affects consumer choice. Carrigan & Attalla concluded that although consumers are increasingly sophisticated, consumer behavior doesn’t favor ethical companies or avoids those that are unethical. Additionally, the study found that a consumer’s knowledge of a company’s unethical behavior didn’t change buying behaviors nor did it contribute to actions against the unethical company. In addition to being cynical about ethics differentiation; consumers consider price, quality, and value more important than ethical criteria in consumer purchase behavior (The myth of the ethical consumer – do ethics matter in purchase behaviour? The Journal of Consumer Marketing, 18(7), 560-560-577.).

Although ethical criteria may not be necessarily used in when choosing a real estate agent, Neale & Fullerton found that consumers do perceive unethical behaviors as unacceptable. In their 2010 study, consumers rated ten of fourteen scenarios of questionable behaviors as being unacceptable (The international search for ethics norms: Which consumer behaviors do consumers consider (un)acceptable? The Journal of Services Marketing, 24(6), 476-476-486.).

Even though unethical behaviors may be considered unacceptable, reporting such behavior is a different story. Curtis, in his 2006 study found that although the seriousness of a breach of ethics would prompt a report, the decision to report unethical behavior is highly correlated to negative mood (e.g., anger, pain, etc) (Are audit-related ethical decisions dependent upon mood? Journal of Business Ethics, 68(2), 191-191-209.).

Rutledge, concluded in a 1994 paper that ethical issues are not always clear. Additionally, responses to such situations depend on personal principles and standards (Conflicts of interest or ‘thou shalt not steal’ revisited. Real Estate Issues, 19(3), 15-15.).

The research might suggest that consumers are not entirely impressed by an adherence to high ethical standards. Furthermore, even when ethical standards are breached, the offenders are not always reported. The research may point to an increasingly pragmatic view that real world ethics is a complex matter that is often determined by a person’s perception.

by Dan Krell
© 2011

This article is not intended to provide nor should it be relied upon for legal and financial advice.  Using this article without permission is a violation of copyright laws.

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Can you depend on your real estate agent?

The trite idiom, “what you don’t know won’t hurt you,” is not the catch phrase you want your real estate agent to embrace. However, home buyers and sellers are often confronted with issues that often fall into this category, but should not prevent you from asking for more information or consulting with your attorney. Some common top red flag situations include guidance regarding contracts and addenda, having an agent insist you hire their vendor, and receiving an offer to purchase with conflicting information.

Although it is recommended that a home buyer and seller consult with their attorney to explain a listing or sales contract as well as addenda, the reality is consumers often rely on their agent’s understanding and explanation of the forms they sign. An example of this is the first time Maryland home buyer addendum. Besides the fact that a first time Maryland home buyers have their portion of the state transfer tax paid by the seller, the Annotated Code of Maryland (14-104 (c) – Real Property) states that the recordation and local transfer tax is to be paid by the seller unless both parties agree to a different arrangement. Even though section 14-104 (c) is clearly stated on the first time Maryland homebuyer addendum, I am increasingly hearing how some first time home buyers were not made aware of this opportunity. One home buyer recently told me they fired their agent because after reading the addendum to their agent, the agent told the buyer that transfer taxes are automatically split between buyer and seller regardless. Although it may have been true that first time Maryland home buyers often waived this opportunity during a seller’s market, it is increasingly being asserted in today’s buyer’s market.

Another red flag situation is when an agent insists a home buyer use a specific provider. For example, it is not uncommon for some buyer agents to compel their clients to hire a home inspector they use on a regular basis; the agent wants to ensure that the deal will not be jeopardized by an inspector pointing out too many concerns. I have heard home owners regretting having hired their agents’ home inspector without an interview or checking into their credentials, because of issues that turn up after closing. Additionally, some home inspectors will recount stories of how they have been pressured by buyer agents to not report items on the home inspection report so as not to “kill” the deal.

For home sellers, a red flag situation arises when they receive a purchase offer with inconsistent terms. Listing agents are often given offers that have inconsistent information, such as deposit checks amounts that conflict with the contract, or loan approval letters that are written for less than the purchase price. Sometimes, after digging a little deeper, is not uncommon to find out that the lender is not licensed to do business in Maryland, or the deposit check bounced. Without the proper information, the seller cannot make a solid decision.

Although you might think your real estate agent should be looking out for you best interest, intentionally or unintentionally- it is not always the case. Although, seemingly innocent or harmless situations can sometimes raise a red flag in your mind, most resolve without issue; however, it should not prevent you from asking for additional information, clarification, asking for credentials, and/or a consultation with your attorney.

By Dan Krell
Copyright © 2011

This article is not intended to provide nor should it be relied upon for legal and financial advice. Using this article without permission is a violation of copyright laws.

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